Monday, August 29, 2005

DOJ Defends its Remedies Requests - POST 3: Youth Smoking Reduction Targets

In a post-trial brief submitted last week, the Department of Justice defended its proposed remedies in the RICO case against the tobacco companies, addressing specifically the argument that these remedies are not consistent with the D.C. Court of Appeals decision that RICO civil remedies must be forward-looking, designed to prevent and restrain future RICO-related misconduct of the defendants.

This is the third of a series of three posts that will address the 3 major monetary remedies: a smoking cessation program, a national anti-smoking education campaign, and youth smoking reduction targets. This post will deal with the third of these - the request for the industry to be fined if a set of youth smoking reduction targets are not met.


DOJ has proposed as a remedy "targeted reductions in youth smoking of 6% per year between 2007 and 2013, for a total reduction of 42% among those 12-20 years old. ... If Defendants fail to meet the yearly targeted reductions, they will be assessed $3,000 per youth above the target levels. ... The assessment, imposed for each youth in excess of the target levels, exceeds Defendants’ financial gain from each such youth. ... It is thus a forward-looking remedy aimed at preventing and restraining future racketeering violations." The remedy is designed to work by "eliminating the economic incentives that defendants experience to market cigarettes to young people."

The government goes on to argue that this remedy is an attractive one because it allows the tobacco companies complete flexibility in deciding how to meet the target levels. They can decide the appropriate mix of price-related, advertising-related, and other measures to meet the targets. In addition, DOJ argues that reaching these targets is feasible, as a 42% increase in cigarette price would result in the required reduction in smoking prevalence among young people. In summary, DOJ argues that this proposed remedy is "an efficient and effective means of removing the economic incentive for Defendants to engage in future RICO violations that make their cigarette brands appealing to young people."

The Rest of The Story

This is clearly the strongest of the three proposed monetary remedies. In contrast to the proposed national smoking cessation program, this remedy is clearly designed to prevent and restrain future RICO violations, not to remedy the damages caused by past or by future violations. And unlike the proposed public education and counter-marketing campaign, I believe this proposed remedy would in fact create an economic incentive for the companies not to engage in youth marketing, because it would fine the industry more for failing to achieve the smoking reduction limits than the amount of money that the companies would reap from recruiting new youth smokers.

So do I then think that Judge Kessler will order such a remedy and that the remedy will be upheld on appeal should she decide in favor of the DOJ in the case?

Not a chance. And here is why:

The proposed remedy, while it may be designed to prevent and restrain future RICO violations, is hardly an efficient means of doing so and it may not even be effective. The remedy is not at all directly tied to future RICO violations and the connection is, in fact, so remote that I would find it hard to believe that a court would approve such a plan. As I pointed out in my May 23 post, youth smoking prevalence is a measure only indirectly tied to future RICO violations. There are a number of reasons why youth smoking prevalence targets may not be met, of which continued marketing to youths is only one.

To understand the quite indirect connection between youth marketing and youth smoking prevalence targets, consider the following two scenarios.

First, suppose that the companies were to completely stop marketing to kids. However, suppose that the entertainment industry began to portray smoking in movies more often and in an ever more glamorous way. According to some research, this would be expected to result in a monumental increase in youth smoking. So despite the fact that the tobacco companies stopped marketing to youths completely and thus refrained from RICO violations, the youth smoking prevalence targets would not be met because of the actions of a party over which the tobacco companies have no control.

The research demonstrates that while tobacco marketing does influence youth smoking behavior, it is only one of a large number of factors. Eliminating youth exposure to cigarette marketing would certainly be expected to lower youth smoking prevalence, but there are a number of other factors over which the tobacco companies do not have control which could come into play and could work in the opposite direction. The overall result could be that the youth smoking reduction targets are not met, even though the tobacco companies have acted appropriately.

This hardly seems like a just approach (to penalize the companies even though they discontinued RICO violations). And it may in fact turn out that the companies have an economic incentive to continue youth marketing. Because if it appears that they are going to have to pay the fines whether they market to kids or not, then the incentive is clearly for them to market to kids. They might as well reap the benefits of an increased customer base.

Now here's a second possible scenario. Let's assume that the American Legacy Foundation's efforts to secure funding for the continuation of the "truth" anti-smoking campaign are successful and that it is as effective as Legacy claims. A 22% reduction in youth smoking therefore occurs and continues for several years. Thanks to Legacy's efforts, there would be a dramatic reduction in youth smoking prevalence, and there would be no need for the tobacco companies to alter their marketing behavior because they wouldn't have to pay the fines anyway. (Remember that the smoking prevalence changes that Legacy attributes to itself were observed in presumed presence of continued tobacco marketing to youths.) Thus, external factors that influence youth smoking could reasonably work in such a way that the youth smoking reduction targets are achieved without changes in youth marketing, and the proposed remedy would not in fact be effective in preventing and restraining these future RICO violations.

Whether these scenarios are likely to occur or not (and by the DOJ's own expert's testimony, the second scenario will likely occur if the public education and counter-marketing remedy is ordered), the very fact that these are possible and not totally unreasonable scenarios demonstrates my point that the proposed youth smoking reduction targets are quite indirectly tied to future RICO violations.

The government mentions in its brief that youth smoking prevalence reduction targets were a part of the failed 1997 global settlement that was ultimately rejected by Congress. And that seems to be the appropriate place for a public health strategy of this nature to be considered. I think you could potentially legislate such an approach to dealing with tobacco-related disease, but I don't see how a court can fashion this type of approach as a remedy in a RICO case. Youth smoking prevalence is just far too indirectly tied to RICO violations to make it appropriate for a court to impose that broad a remedy for such narrow a purpose.

The rest of the story suggests that none of the monetary remedies that the government has proposed is likely to be ordered by Judge Kessler and/or upheld by the D.C. Court of Appeals because they either are: (1) designed to provide equitable relief for, rather than prevent future RICO violations (smoking cessation); (2) ineffective at preventing future RICO violations (public education and counter-marketing campaign); or (3) far too indirectly tied to future RICO violations to make them an effective preventive remedy (youth smoking reduction targets).

I think that pretty much does it for any reasonable chance of a substantial monetary remedy in the DOJ case - I imagine probably to the great disappointment of many anti-smoking groups who seem to be in this mainly for the money. Unless, of course, the Supreme Court decides to hear the case and rules in the government's favor. Had the anti-smoking groups spent less time and less of their donors' money whining about the loss of money and issuing public, political attacks on individuals for decreasing the monetary requests, and more time helping to fashion effective remedies that would directly restrain future RICO violations by directly regulating tobacco industry marketing practices, then I think the public interest and the public's health would have been far better served.

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